Debt-to-income ratio, or DTI, is your total monthly debt payments divided by your gross monthly income. If you earn $10,000 a month before taxes and your debts plus the new house payment total $4,300, your DTI is 43%. It is the number that most often decides how much you can borrow, and most borrowers misjudge it in both directions.
Front-end and back-end
Lenders talk about two versions:
- Front-end (housing) ratio: the new housing payment alone, divided by income.
- Back-end (total) ratio: the housing payment plus every other monthly debt, divided by income.
The back-end ratio is the one that usually controls the decision. When someone says "your DTI," they almost always mean the total.
What counts as debt
Anything on your credit report with a required monthly payment, plus some things that are not on it:
- Car loans and leases. The full payment. On many programs a loan with only a few payments left can be excluded, but a lease generally cannot, because you will just lease another car.
- Credit cards. The minimum payment shown on the report, not the balance and not what you actually pay. Paying in full every month does not make the minimum disappear from the calculation if a balance reports.
- Student loans. Even deferred ones. Each program has its own rule for what payment to count when the report shows zero or an income-driven amount, and those rules differ meaningfully. This is one of the most common reasons two lenders give the same borrower two different answers. For FHA specifically, see FHA and Student Loans.
- Personal loans, installment loans, buy-now-pay-later plans that report.
- Child support and alimony you pay. See FHA, Child Support and Alimony.
- Other mortgages you keep, including the full payment on a home you are leaving unless it qualifies for rental income treatment. See Rental Income on Your Departing Residence.
- Cosigned debts, usually, even when someone else makes the payment, unless you can document that they have paid it themselves for a sustained period.
What does not count
Utilities, cell phones, insurance premiums, groceries, gym memberships, subscriptions, daycare, and taxes withheld from your paycheck. That is why a lender may approve a payment your monthly budget says is tight. The ratio is a credit measure, not a budget.
How high can it go?
There is no single number. Conventional files run through Fannie Mae or Freddie Mac automated underwriting can be approved with total ratios into the high 40s, and up to 50% on strong files, while a manually underwritten conventional loan is held much lower. FHA's automated system can approve higher still when the rest of the file is strong. VA leans on residual income, the cash left after obligations, alongside the ratio. See VA Residual Income Explained.
And every lender can layer its own stricter limit on top. If you were told your ratio is too high, ask whether that is the program's limit or that lender's. See Declined by One Lender, Approved by Another.
The income side matters as much as the debt side
Borrowers focus on debts, but the denominator is where files quietly lose. Lenders count documented, stable, likely to continue income:
- Salary is easy.
- Overtime, bonus and commission generally need a history, often two years, and are averaged. A raise last month may not count yet.
- Self-employed income is usually what your tax returns show after write-offs, which is often far less than what the business actually produces. Alternatives exist. See Bank Statement Loans: How Income Is Calculated.
Five fast ways to lower your DTI
- Pay a car loan down to its final few payments, where the program allows the exclusion.
- Pay revolving balances down so the required minimums drop.
- Ask how your student loan payment is being calculated. An income-driven repayment amount, properly documented, can be far lower than the default calculation.
- Do not open anything new. A new card or furniture financing adds a payment.
- Add a qualified co-borrower if one is living with you or willing to sign.
Do these before you apply, not after you are under contract. Ratio fixes need to report on your credit, and that takes a cycle.
Why ask me
- I answer the question before I sell you anything. If renting, waiting or a different program is the better move, I will say so.
- Real numbers, not a calculator guess. I price your actual scenario, side by side, with the fees on the page.
- Every program under one roof. Conventional, FHA, VA, jumbo, and non-QM options like bank statement, DSCR and asset-based loans, so the program fits you instead of the other way around.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
More plain-English answers in the Mortgage Education library.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Program guidelines, eligibility requirements and documentation standards vary by investor and change over time. Rates, terms and program guidelines change and depend on credit approval, property appraisal and other qualifying factors. Not all applicants will qualify. This is not legal or tax advice; consult a qualified professional about your own situation.
Find out which program actually costs you less
FHA, conventional and jumbo price the same borrower very differently once the mortgage insurance is compared across the years you will own the home. Tell me the shape of your file and I will run them side by side.
Looking at a specific home? Send me the address and I will run the numbers: rickykhamis.com/analyze
